The Turkish Lira Drops to Fresh Lows Weighted by Caucasus Conflict

The Turkish lira fell to record levels against the dollar, the euro and the pound on Monday, September 28, in light of fears of increasing Turkey’s intervention in the rapidly escalating conflict in the Caucasus, despite the sudden interest rate hike last week in order to support the currency.

The Turkish lira fell 1.6% and was on a path leading to its worst day since early August, when the latest selloff began to hurt the currency, which lost half its value in less than three years.

The sell-off erased a rally achieved late last week when Turkey’s central bank unexpectedly raised interest rates by 200 basis points to 10.25%.

But analysts who welcomed the view of monetary policy said that the currency came under new pressure after a heavy exchange of fire between Armenia and Azerbaijan in the worst clash between them since 2016. Turkey said it supports Azerbaijan.

The currency stood at 9.0780 against the euro and 10.0557 against the pound by 1056 GMT. The lira also took a hit from the strengthening of the dollar, and it traded near a record low against the US currency at 7.7940.